Contending with the Dollar’s Strength 04-23-15

The U.S. economy sported a big bright spot in March, with a 6.1 percent increase in sales of existing homes. Americans bought homes at an annual rate of 5.19 million units for the first time so far in 2015, according to the National Association of Realtors.

Home buyers came back to the market in the early spring after extremely cold and snowy weather dampened traffic in January and February. Given low mortgage rates and increased hiring, home sales are expected to improve this year after a slight decline in 2014. Limited inventory supply of existing homes has impacted prices, which have risen.

Meanwhile, the high level of the U.S. dollar relative to other currencies has hurt U.S. manufacturers and the growth potential. On Monday, New York Fed President William Dudley noted, the “roughly 15 percent appreciation of the exchange value of the dollar since mid 2014 is making U.S. exports more expensive and imports more competitive.” Read more about Contending with the Dollar’s Strength 04-23-15

The Stocks Are Marching On 04-16-15

The U.S. stock market just keeps taking mixed economic news in stride. The U.S. economic activity continued to expand from mid-February through the end of March, despite the negative effects of a strong dollar and falling oil prices in the U.S. manufacturing sector.
The release of the latest Beige Book, the central bank’s periodic report of anecdotal business information, assembled before April 3 by the Cleveland Federal Reserve Bank from contacts nationwide, highlighted growth as recorded by most regional Fed banks as either progressing at a “moderate” or “modest” pace. “Demand for manufactured products was mixed during the current reporting period. Weakening activity was attributed in part to the strong dollar, falling oil prices, and the harsh winter weather,” the Fed said. The results factored in the decline in oil and gas drilling investment and related job losses.
On the other side of the mixed picture: U.S.

No Growth? No Problem... Almost 04-09-15

Nonfarm payrolls for March underperformed expectations, but the market didn’t even blink. The economy added 126,000 jobs, nearly half the projection of an increase of 240,000. The miss relative to the consensus was the biggest since the recession, and the actual monthly gain was the weakest in more than a year.

The lack of a negative market reaction (generally otherwise expected) stems from the increased probability that the U.S. Fed should be in much less of a hurry to raise rates. If policymakers do move to raise, the speed at which they increase, based on data, will likely be very moderate. Read more about No Growth? No Problem... Almost 04-09-15

Cashing in with Dividends 04-02-15

What’s a company to do with all that cash? The answer to that question for many of the S&P 500 companies that currently sit on a combined record $1.4 trillion has been to make share repurchases. Stock buybacks hit an all-time high last year of $553 billion and undoubtedly contributed to the market’s positive return. We don’t know if corporations will match that pace this year, but it appears that we’re off to a good start in the first quarter.

Dividends, which are very near and dear to our hearts and have historically accounted for about a third of the market’s annual returns, have played second fiddle in corporate America’s plans to maximize shareholder value, though they have not been altogether overlooked. Read more about Cashing in with Dividends 04-02-15

Economic News Fails to Support the Market 03-26-15

In a speech earlier this week, Federal Reserve Vice Chairman Stanley Fischer said than “an increase in the target federal funds [rate] range likely will be warranted before the end of the year” and that should happen when “the expected return from raising the interest rate outweighs the expected costs of doing so.” In making the decision, “a wide range of information regarding labor market conditions, inflation, and financial and international developments” will be considered.
Read more about Economic News Fails to Support the Market 03-26-15